The Guardian recently saw a copy of a report produced by Rothschild to conclude a feasibility study for the government. For much of 2010 and 2011, they were tasked with finding a way to "monetise" the growing book of outstanding student loan balances (valued somewhere around £40bn even before the recent rise in tuition fees). That is, they were asked to find a way to sell a quarter to a half of those loans to third parties – insurance companies and pension funds, most likely – while ensuring "value for money".

For many such a sale is hard to fathom. Writing in the Financial Times just after the publication of the 2011 higher education white paper, Martin Wolf said: "The white paper contains many other ideas, some good and some bad. A bad one is selling off the loan book. The loan book is sure to be most valuable to the state, which has much the lowest cost of funding."

When assessing the value of a future income stream, its net value is worked out by factoring in the cost of the borrowing required to acquire the asset. Given the same cash flow, the party with the lowest interest rates on borrowing should gain the most value.

Even a good sale on Rothschild's terms would mean the government foregoing some future income. And that's before we even consider Rothschild's proposal of a "synthetic hedge" against certain movements of RPI and the base interest rates offered by banks. This sweetener would bind future governments to underwrite those income flows – in effect a large subsidy. This would enable £10bn-plus of loans to be shifted, even if individual borrowers's terms and conditions could not be altered at source.

So where is the logic? Is Wolf right that a sale is "economically illiterate"?

There are other considerations.

The coalition has chosen to present macroeconomic competence to the public through the headline statistics of the deficit and the debt. These KPIs (key performance indicators) capture the present financial situation but therefore neglect certain kinds of future income stream and liability. Turning the loans into money now would pay down some of the associated borrowing (additional debt) the government had to issue to finance the loans in the first place. It would make political sense to pass up some of what is owed to the government to shift liabilities off the balance sheet before 2015.

With an impending comprehensive spending review, there are heated talks between the Treasury and the Department for Business, Innovation and Skills, which is responsible for universities. A compromise could involve a sale and the Rothschild review is therefore a live document despite being dated November 2011.

The risk is clear. In last year's fiscal sustainability report, the Office for Budgetary Responsibility predicted that government liabilities associated with student loans would grow from around 3% of GDP today and only peak in the early 2030s hitting a striking 6% (roughly £95bn in today's terms). The new report is due next month and those figures are likely to be worse, because new student loan uptake has been higher than expected and because graduate salaries are not growing as predicted in a flatlining economy.

Given the size of borrowing and the long-life times of student loans (potentially until retirement for those who started university before 2006), should repayments not stream in as modelled then there is a problem. But in that case who would want to buy without a discount or subsidy? Or indeed a change to the terms of loans.

We made the contents of the Rothschild review public to demonstrate what "play" is being considered. The "synthetic hedge" may appear more acceptable than actually changing the terms for individual borrowers, but it still points to something profoundly troubling about current politics. The logic behind the sale is short-termist and contemptuous of citizens. Under the terms of the 2008 Sale of Student Loans Act, a sale can be approved by Vince Cable and proceed without consent or consultation and without a parliamentary vote. I suggest we consider how to rectify this.